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Johnson's Russia List


July 10, 1998  
This Date's Issues: 2256 

Johnson's Russia List
10 July 1998

[Note from David Johnson:
1. Reuters: Russia Asks West for Cash, Advice, Moral Support.
(Washington conference).

2. Rossiiskaya Gazeta: WHO IS SPREADING THE RUMOUR? 
3. Reuters: Yeltsin seeks world backing in Russia crisis.
4. The Economist leader (editorial): The price of an icon.
5. Reuters: Russia puts '98 grain harvest at 64-67 mln tonnes.
6. AP: Russian Soldiers May Get Dog Food.
RUNNING FOR THIRD TERM. (Igor Shabdurasulov).

8. The Economist: RUSSIA’S CRISIS. Could it lead to fascism? 
9. Los Angeles Times: Carol Williams, Last Rites for the Last Czar 
Get Low Priority.]


Russia Asks West for Cash, Advice, Moral Support 
9 June 1998

WASHINGTON -- (Reuters) Russia's ambassador to the United States called 
on Thursday for cash, advice and moral support as his country grapples 
with a crisis of confidence about debts and a fragile currency. 

"We need understanding, we need real assistance, we need moral support 
and ... we need about $10 billion to $15 billion as a stabilization fund 
for the ruble," ambassador Yuli Vorontsov told a seminar on Russia's 
financial crisis. 

The Russian government, which has insisted it will not devalue the 
ruble, has asked for a $10 billion to $15 billion package of financial 
support from the International Monetary Fund and other lenders. 

A senior IMF official declined to comment on the state of talks between 
the two sides and said new IMF loans would drain resources. 

"We could manage an amount of assistance to Russia with the facilities 
that are currently available to us, but it would not be easy and it 
would make the situation thereafter very difficult," John Odling-Smee, 
head of the IMF division dealing with the former Soviet republics, told 
the seminar. 

Odling-Smee said the agenda for restructuring the Russian economy should 
include changes to the tax system, including the end of payments in 
kind. Tax collection should be strengthened and the government needed to 
crack down on its own arrears. 

In the longer term Russia needed to improve the efficiency of its health 
and education services to help the government meet spending targets, he 
added. "Reforms like that take time and will not be easy," he said. 

He said Russia's current priority was to win back market confidence to 
avert the threat of devaluation. 

But George Washington University professor James Millar, hosting the 
seminar, said devaluation might be a way to force the government to 
tackle its problems. 

"I do not see that there is anything the IMF and others can do other 
than to postpone the inevitable," he said. 

Clifford Gaddy, a fellow at Washington's Brookings Institution, said a 
new rescue deal would not help Russia's "virtual economy" -- a system 
that overstated the value of goods and allowed payments in barter rather 
than in cash. 

"Our proposal is not to give Russia a bailout, not because we are in any 
way enemies of Russia, but as a genuine concern about the future of the 
country," he said. 

"An extra $15 billion could give Russia an extra 10-12 months at most, 
maybe less...This system is a dead end which day by day is making Russia 
poorer not richer." 

Russia has already received $5.8 billion of a $9.2 billion IMF loan 
approved in 1996, although payments have frequently been delayed because 
of concerns about Russian tax collection. 

IMF officials have said the fund would be the largest single contributor 
to a new rescue package, although help would also come from other 
international financial institutions and from the private sector. 


>From RIA Novosti
Rossiiskaya Gazeta
July 10, 1998

The Kremlin believes that the rumours about the President's
poor health are being spread by somebody pursuing his own
political, economic or other interests, presidential press
secretary Sergei Yastrzhembsky said yesterday.
It is clear that somebody is deliberately spreading this
rumour, he said. Yastrzhembsky did not say who or any, but
admitted that standing behind this campaign "may be somebody's
political, economic or financial goals." 
Immediately after Sergei Yastrzhembsky made this statement,
journalists of the leading Russian mass media saw Boris Yeltsin,
in robust health and a good mood before his working meeting with
Minister of Justice Pavel Krasheninnikov in the Kremlin. 


Yeltsin seeks world backing in Russia crisis
By Anatoly Verbin

MOSCOW, July 10 (Reuters) - President Boris Yeltsin sought support from
foreign leaders on Friday to overcome a severe economic crisis but he said
Russia was strong enough to crush any ``extremist'' attempt to seize power. 

Yeltsin, who has said the crisis might be dangerous socially and politically,
also decided to stay in Moscow next week, putting off his summer holiday in
the Karelian lakeland. 

``Russia needs strong authority rather than a strong hand,'' he said in
televised remarks to senior military officers at a ceremony in the Kremlin. He
called the officers ``a reliable support'' both for Russia and for him

``We have enough force to cut short any extremist plans to seize power,'' he
said. ``They will fail.'' 

The 67-year-old leader is known for his acute sense of political danger, and
his burst of activity indicated Yeltsin saw an urgent need for his personal
intervention, both in securing foreign aid and in reasserting his grip on

A Kremlin statement said Yeltsin had just spoken by telephone with German
Chancellor Helmut Kohl, French President Jacques Chirac and British Prime
Minister Tony Blair. 

``They discussed the situation on world financial markets, and implementation
of a programme of anti-crisis measures by the Russian government,'' it said. 

Yeltsin also planned to speak with U.S. President Bill Clinton and
International Monetary Fund Managing Director Michel Camdessus. 

The government has for years battled low tax revenues and a vicious circle of
non-payments between enterprises, leading to delays of many months in paying
millions of workers. 

The crisis has become especially acute as a result of Asia's financial crisis,
a big drop in world oil export prices and Yeltsin's sudden sacking of the
government in March. 

All those factors shattered investors' confidence and they have abandoned
Russia's markets in droves, leaving the government staggering under a mountain
of short-term debt. 

While trying to push its package of anti-crisis laws through both chambers of
parliament, the new cabinet of Prime Minister Sergei Kiriyenko is also seeking
up to $15 billion from the IMF, the World Bank and private lenders. 

The IMF is generally positive but says the cabinet must first get
parliamentary approval and prove its plan is working. 

John Odling-Smee, a senior IMF official, arrived in Moscow for loan talks and
Russian debt negotiator Anatoly Chubais told the Wall Street Journal he
expected a preliminary deal on new IMF credits by Saturday. 

Kiriyenko got a boost from the Federation Council, the upper chamber of
parliament, when it voted overwhelmingly to support in principle the
government's anti-crisis proposals. 

Most of the laws underpinning the programme have still to be adopted by the
communist-led State Duma, or lower house, and only then can they be considered
in detail by the Federation Council. 

Kiriyenko told the Council that local financial markets had deteriorated and
social tension was rising, but vowed to meet domestic debt servicing

``The situation on financial markets has got worse, treasury bill yields are
rising, social tension is also growing. We are ready to consider any proposal,
but we simply cannot fail to repay treasury bills.'' 

Russian shares ticked up on Friday morning. The Reuters real-time dollar-
denominated RTS index had risen 4.40 percent to 92.33 at 0920 GMT on moderate
volume of 93 million shares. 

But bad news kept streaming in. 

Rating agency Standard & Poor's cut the credit rating of six Russian banks and
Agriculture Minister Viktor Semyonov was quoted as saying Russia would harvest
just 64 to 67 million tonnes of grain in 1998, down from 88.5 million last

The Russian central bank reiterated on Friday that it would not relax its
tight monetary policy soon and issued a stern warning to commercial banks
against the risks of selling roubles. 

Russia's problems have sparked labour unrest. Angry coal miners have been
blocking the vital Trans-Siberian railway for the past week in a repeat of
actions which brought rail traffic across much of the country to a standstill
in May. 

In a separate development, the government admitted defeat in its attempts to
raise $1.6 billion quickly by selling the last major oil asset in state hands,
Rosneft, and extended the tender for a 75 percent stake in the company to
October from July. 

A Kremlin statement said Yeltsin would ``work intensively'' in Moscow next
week. Russian news agencies had widely reported preparations for him to go on
holiday from mid-week. 

Yeltsin has already cancelled a number of foreign trips in order to focus on
domestic problems. 


The Economist
July 11-17, 1998
[for personal use only]
Leader (editorial)
The price of an icon 

ONCE again, Russia’s finances are on the brink of disaster. Once again, 
the begging bowl is out. Once again, agonised western governments, led 
by the United States, are contemplating shelling out for fear of being 
blamed for “losing Russia” if they do not. Once again, it is hard to be 
sure that such generosity is, in Russia’s case, sensible. 
By putting geo-politics before hard-nosed economics, is the IMF, which 
is being asked to put the main dollop into the begging bowl before 
passing it round, debauching its own purpose—to lend only on the safest 
assumption that the money will come back? Why prop up Russia’s rouble 
when other basket-cases, such as Indonesia, whose economy is bigger than 
Russia’s, were blithely told only last year that their currencies were 
not worth supporting and that help should be directed at a general 
economic restructuring, not a bailing out of banks? Is there any reason 
to believe that Russia will not blow the money away, after letting its 
richest and most grasping citizens pocket great wads of it while 
ordinary folk sink further into misery? Is there the slightest chance 
that a Russian bail-out, this time, will work? 
Certainly, there is a powerful case for the West to turn its back on 
Russia and let it stew in its own juices, until such time as it has done 
what it has long promised—rebuilt its financial and legal systems, 
enabling it to draw investment from outside in an open global market. 
Many of the westerners who are crying loudest for others, essentially 
the Fund, to save the rouble are those same punters who knew they were 
taking a big risk by playing the up-and-down Russian stockmarket in the 
first place; and a bail-out may well help them more than it helps 
ordinary Russians. Meanwhile, the Fund, which is cash-strapped itself, 
has already provided Russia with generous loans (more than $9 billion 
over three years) whose conditions, as things stand, are periodically 
Over the past few years, Russian governments have solemnly promised to 
enact rafts of economic reforms—especially in the field of taxation—but 
have failed to deliver. Why should this one behave differently? Even if 
it tries to, has it the ability and the clout to push change through? 
The entire economic system in Russia is so crooked and leaky that there 
is no knowing where the money will go. 
Even if the IMF, the World Bank, friendly governments and commercial 
banks do all weigh in, it is unclear that Russia’s current reform-minded 
government will survive. Certainly it is too late to set much store on 
the word of Boris Yeltsin, Russia’s ailing and erratic president. 
Whatever happens, he will almost certainly remain a lame bear for his 
remaining two years in office—assuming his health and political nerve 
hold up that long. In the current crisis, he has at least been 
consistent in backing his new prime minister, Sergei Kiriyenko. But in 
the past, Mr Yeltsin has often distanced himself from necessarily 
unpopular measures, thereby lessening the chances that they may be 
enforced. There is no guarantee he will not impetuously decide, if the 
going gets too rough, to sink this government for yet another. Even now, 
his ability to influence the course of events—by rallying public 
opinion, by cajoling parliament, by giving the government his moral 
support, by issuing decrees—seems to be waning, as dangerous forces of 
opposition start to wax. “Backing Yeltsin” hardly has the ring of sense 
it had a few years ago. 
All these reasons for not helping Russia out of its current mess have 
merit. Moreover, stabilising the rouble may not stabilise the country. 
The political situation may prove so rickety that the rouble may, in 
three months or so, still crash—whether the IMF has backed it or not. 
Yet, despite all of this, it is still worth a try. 

One last chance 

Today’s Russia problem is bigger, and more urgent, than Mr Yeltsin. Put 
simply, the argument for helping Russia now is that it would give its 
new government a chance of steadying market nerves, and thereby provide 
a long enough breathing space—a year or so—for reforms to bite and to 
start benefiting people. If no help is forthcoming, there is every 
chance that the ensuing economic chaos, in the wake of a likely rouble 
crash, will not only bring down the current government but may even 
bring down Russia’s rough-and-ready democracy. 
This is no idle fear (see article). Russia is politically at its most 
fragile since October 1993, when the country divided between those, 
alongside Mr Yeltsin, who believed that a parliament of part-Soviet 
lineage should not be allowed to paralyse an elected, reform-minded 
presidency (and that bloody force was justified in subduing it) and 
those who thereafter believed Mr Yeltsin and the reformers to be devils. 
An unholy alliance of “reds and browns”—Communists and extreme 
nationalists—in today’s Duma and among growing groups of strikers and 
diverse malcontents across Russia is now flexing its muscles. The 
inflation-driven mayhem following a rouble collapse could shift power 
into the hands of a new, more xenophobic, anti-reform parliament. Mr 
Yeltsin could fall. An anti-democratic strongman could emerge, whether 
or not by election. In short, Russia’s future as a market-based, albeit 
still rough-hewn, democracy hangs in the balance. 
Two other big factors make Russia different from, say, Indonesia. The 
first is indeed geo-political. Russia remains a country with thousands 
of nuclear warheads, and nervous neighbours whose newly-resumed 
statehood would be under threat if nationalist non-democrats took over 
in the Kremlin. True, the IMF should not apply political criteria to its 
terms of lending. That is why governments and commercial banks should be 
encouraged to risk lending alongside the Fund. 
Second, Russia does have a genuine reform team in place; Indonesia does 
not. Mr Kiriyenko’s government—Mr Yeltsin notwithstanding—is the 
best-equipped to tackle the gargantuan tasks ahead of it since communism 
collapsed six-and-a-half years ago. It includes a prime minister 
genuinely bent on reform (not, like his predecessor, Viktor 
Chernomyrdin, more concerned to keep the status quo) and a clutch of 
robust reformers in key posts. Note, too, that in the past two years 
Russia had achieved a steady currency and tolerably low inflation 
(around 10% a year). It is not Mr Kiriyenko’s fault that Asian turmoil 
has knocked the bottom out of emerging markets. Nor is it his fault that 
oil and gas prices, on which Russia is hugely overreliant, have slumped. 
The package of spending cuts and tax reforms that he is striving, right 
now, to push through parliament is a good one. 
Mr Kiriyenko still needs to prove he has the political guts and skill to 
argue his fiscal changes past the Duma’s recalcitrants before its 
session ends next week. The IMF should insist that this happens before 
any stabilisation fund is agreed to. In the end, outsiders can only help 
a Russia that is ready to help itself. But time is running out. Mr 
Kiriyenko—and Russia—deserve this last chance. 


Russia puts '98 grain harvest at 64-67 mln tonnes

MOSCOW, July 10 (Reuters) - Russia will harvest 64 to 67 million tonnes of
grain in 1998, compared with 88.5 million in 1997, Minister of Agriculture and
Food Production Viktor Semyonov was reported by Interfax as saying on Friday. 

He was quoted as saying the main cause for the decline in output was a drought
that had affected 35 grain growing regions of the country and had already
killed crops on an area of 11 million hectares. 

Semyonov added that early estimates indicated the farming sector had already
lost two billion roubles ($320 million) as a result of the drought. 

But he said there was no cause for alarm because Russia had 20 million tonnes
of grain in storage and would be able to meet demand this year from its own

Independent research organisation SovEcon on Thursday forecast production in
the range 64 to 70 million tonnes, and said the figure would lead to a cut in
grain exports but was not likely to lead to imports. 

The main reason imports are unlikely is that demand for feed grain is dropping
as Russia's livestock numbers are declining. 

($ = 6.2310 roubles) 


Russian Soldiers May Get Dog Food
July 10, 1998

MOSCOW (AP) - The cash-strapped military has apparently found a new way to cut
costs - it's been feeding some soldiers with canned dog food instead of meat,
a newspaper reported Friday. 

Military prosecutors, who recently checked army food depots near Moscow, found
1,000 tons of dog food, the business daily Kommersant reported. 

The prosecutors also discovered that butter, fish and other products at the
depots were bought after their shelf life had already expired. 

The check revealed many other irregularities, the report said. In one example,
a Russian meat factory was systematically placing less meat in its cans than
indicated by the label. The military paid for some 16 tons of meat that it
didn't receive. 

When the prosecutors warned the military command about their intention to
check several other food depots throughout Russia, Lt. Gen. Vyacheslav
Savinov, the chief of the Defense Ministry's food service, submitted his
resignation report, the newspaper said. 

The Russian armed forces have been plagued by rampant corruption and other
crimes. Dozens of senior officers have faced criminal charges in recent years.


>From RIA Novosti
Commersant Daily
July 10, 1998

Boris Yeltsin's deputy chief of staff Igor Shabdurasulov
yesterday advised the President against running for the third
term because his health and psychological state would not
allow him to work efficiently after the year 2000. The Kremlin
for its part has doubts about Shabdurasulov's mental health,
if not physical condition.
Rumours of Yeltsin's deteriorating health condition were
spread in the financial markets yesterday. His press secretary
Sergei Yastrzhembsky hurried to say that "the wave of such
rumours is being launched by some people who pursue definite
political, economic and financial aims."
Half an hour later Yastrzhembsky had to admit that there
are such people among the presidential staff as well.
Shabdurasulov, who is the deputy chief of staff in charge of
the "ideological package," told Russky Telegraf newspaper that
Yeltsin's physical condition cannot be called ideal and it is
impossible to say that the President is full of strength and
very active for work around the clock." The President, he went
on, "has accumulated such a burden of tiredness, both physical
and psychological" that he should not stand for re-election to
the third term.
Shabdurasulov's remarks first surprised the Kremlin, to
put it mildly, but its next reaction was their toughly-worded
rejection. Kommersant's journalists found out that chief of
staff Valentin Yumashev was particularly displeased with the
fact that his deputy dared to claim that the position of the
chief of staff was close to his.
When summoned on the carpet, Shabdurasulov could not say
anything more coherent than that he "has not seen the final
variant of the interview." After that the presidential press
service was instructed to state that all that had been said by
that high-ranking Kremlin official reflected "only his
personal point of view, which does not coincide either with
the position of the President's chief of staff or with the
position of the staff as a whole."
Sergei Yastrzhembsky confirmed in a conversation with
Kommersant's correspondent that it was impermissible for "a
member of the Kremlin team" to make such remarks. "The
situation in the country, especially the financial situation,
reacts too painfully to such statements."
Shabdurasulov's bold remarks look all the more strange as
only a week ago another high-ranking official--Sergei
Shakhrai--was sacked precisely because he dared to doubt that
Yeltsin would run for the third term, adding that the best
candidate for the new presidency would be Yury Luzhkov.
Shabdurasulov in his interview not only said that all the
present "power and financial elites" might support Luzhkov but
in fact advised Yeltsin to give up the idea of the third term
of the presidency, thereby ensuring "a stable and legitimate
change of power."
The Kremlin has two explanations for such boldness. The
first is Shabdurasulov's short-sightedness, to put it mildly.
One of Kommersant's Kremlin sources did not beat about the
diplomatic bush and said: "How could he be so silly?!"
The second is that he acted as the "mouthpiece" of some
influential forces interested in the ruble's devaluation, for
instance, Boris Berezovsky with whom Shabdurasulov has a very
close relationship. (By the way, Shabdurasulov in fact
repeated word by word what Berezovsky said a month ago about
Yeltsin's prospects for 2000.) It is common knowledge that the
Nezavisimaya Gazeta newspaper consistently campaigns for the
ruble's devaluation.
By provoking the deterioration of the situation in the
money market, among other things, some try to make the
government and the President agree to devaluation. Yesterday
in the afternoon world new agencies carried the following
banner: "Presidential aide says Yeltsin is too weak to run for
the third term."
It is clear that Shabdurasulov has grossly violated the
rules of apparatus life. Such violations are usually followed
by immediate resignation. If Yeltsin does not sack
Shabdurasulov, the Kremlin will look foolish, especially after
the Shakhrai case. That would mean that some may say
sacrilegious things, while others are not allowed to do so.
Shabdurasulov yesterday told this correspondent that
"theoretically, he should be fired," but added that "some
forces" may interfere and prevent his resignation.


The Economist
July 11-17, 1998
[for personal use only]
Could it lead to fascism? 
M O S C O W     
Yes, says its president, Boris Yeltsin, if things continue to go from 
bad to worse. Thanks partly to his own shortcomings, he could almost be 

EVEN by Russian standards, it has been a frightening and sometimes 
bizarre few weeks. The rouble is on the edge of a precipice. Short-term 
interest rates, just 21% last autumn, shot up to 150% last month before 
coming down to 60%; they have again climbed back to 80%. If the rouble 
crashes, economic—and quite possibly political—catastrophe beckons. 
Instead of pottering around their weekend dachas and bathing in muddy 
pools (their usual summer pastimes), intelligent Muscovites are talking 
seriously—for the first time in five years—about a financial and 
political crisis that may be settled only by force of arms. 

Mayor Luzhkov and General Lebed: strongmen in waiting? 

Foreign investors are close to panic. Russia’s notorious tycoons, the 
so-called “oligarchs” who control fat swathes of the economy (and send 
much of their asset-stripped profits abroad rather than reinvest them at 
home), have been fighting among themselves and with Mr Yeltsin. Instead 
of propping up the status quo as they once did, they seem to be 
challenging it. Russia’s four-month-old government, under an 
inexperienced 35-year-old, Sergei Kiriyenko, is fighting against a Duma, 
the country’s lower house of parliament, that is loth to enact the 
necessarily painful reforms that would hurt an already bitter and 
exhausted populace. Mr Kiriyenko’s team is gasping for survival before 
it has barely got going. Things may start coming to a head next week 
when the Communist-dominated parliament holds its final session before 
the summer holiday. Either Mr Yeltsin or his parliamentary critics, or 
both, may decide that the time has come for a real battle for control of 
the country. 
Spurring Mr Kiriyenko on is dread of an abrupt devaluation which could 
lead to a collapse of confidence in the economy, not only among foreign 
investors but among Russian citizens. This would spell doom for the 
banking system (on which much of Moscow’s superficial prosperity is 
based), bring down the Kiriyenko government and, as one American 
diplomat put it, “signal the end of liberal Russia”. 
The stockmarket, which has slumped by more than 60% since the new year, 
would fall even faster and further. Import-dependent Russians, poor as 
most of them already are, would become still poorer. The central bank 
would have to print money. Inflation, which has been more or less under 
control (at an annual rate of about 10% at last count), would rocket. 
Extra-parliamentary revolt, egged on by Russia’s many angry nostalgists 
from the Soviet era and perhaps endorsed by surly generals, cannot be 
ruled out. 
The only factor shoring up the rouble is the widespread assumption that 
the United States and other western governments will come up with a 
rescue package of at least $15 billion by next month. That belief was 
strengthened this week, when the government said an agreement in 
principle with the IMF should be made within the next few days and 
President Bill Clinton said he would come to Moscow in September. 
Against this nerve-racking backdrop, and the dire effects of falling oil 
prices, Mr Kiriyenko’s government has been struggling to do the right 
things. A vital new tax code is grinding its way through a recalcitrant 
parliament. A new tax-collecting boss, Boris Fedorov, has been making 
creative mayhem by threatening to arrest the heads of Russia’s largest 
companies if they do not pay their dues. On July 2nd it was announced 
that the assets of Russia’s biggest company, the gas monopoly Gazprom, 
which provides the country with almost a quarter of its tax revenue but 
should pay still more, had been seized. A few hours later, a deal had 
apparently been done—and the confiscation order rescinded. Presumably, 
though the figures are already being disputed, a bit more money from 
Gazprom has been extracted. 
But the government needs a lot more to bolster its credibility. For one 
thing, millions of workers, including teachers, coal miners and 
soldiers, have not been paid—sometimes for more than a year—despite Mr 
Yeltsin’s promises that they would be. The breezy idea that these 
millions can survive on factory handouts, barter and moonlighting is 
misplaced. It is a mystery how many of them survive at all. 
In fact, many do not. Beggary, penury, crime, alcoholism, stress, the 
horrible novelty of unemployment (now 9%, according to the International 
Labour Organisation) and a male life expectancy of 58 years all help to 
keep the anger bubbling. An array of provincial towns—the ancient city 
of Kostroma, near Moscow, and Petropavlovsk, capital of Kamchatka in the 
far east, to name but two—have been deprived of electricity or gas as a 
result of unpaid bills. Vladivostok has ground to a halt. If the taxmen 
get nastier, such austerity will sharpen. Imagine what that will be like 
when winter draws in. 
Yet, at the same time, it is hard to see the government fulfilling its 
latest pledge to cut spending—while paying off all those arrears. 
However fine Mr Kiriyenko’s intentions, the country is seething with 
resentment. It will seethe even more, if and when reforms begin to 
bite—especially if a recently enacted bankruptcy law begins to take 
effect. While misery is nothing new, there is an atmosphere of chaos and 
trepidation that gives hope to both extremes of the political spectrum. 
Other strange happenings in the past few weeks have given politics an 
unusually febrile air. A few weeks ago, the country’s head of statistics 
was arrested on bribery charges (presumably on suspicion of helping 
companies to pay less tax). Last week, the finance minister, fretting 
about the prospect of a rouble devaluation, was flatly contradicted by 
the central bank governor, who said that no such thing would happen. 
Then, with negotiations just starting with the IMF for an emergency 
“stabilisation fund” to rescue the rouble, the feebleness of the 
government was underlined when Mr Kiriyenko felt obliged to call in 
Anatoly Chubais as Russia’s chief negotiator—even though he had been 
unceremoniously sacked when the new prime minister was appointed. 
A few days ago, just to give the atmosphere a still more lurid flavour, 
Lev Rokhlin, perhaps Russia’s most popular general and almost the only 
one to emerge from the war in Chechnya with any credit, was found 
murdered at his dacha outside Moscow. His wife was charged; naturally, a 
host of media reports are suggesting foul play on high. The general 
joined parliament on a broadly pro-government ticket but moved into open 
opposition after denouncing the scurvy treatment of the army. He then 
set up a political movement that was fiercely opposed to Mr Yeltsin and 
to proposed cuts, especially in the army. His funeral on July 7th turned 
into a rowdy anti-government demonstration by 10,000 people. 

Generals, advance 

Other present and past soldiers, not least Alexander Lebed, a populist 
ex-general who came third in the last presidential election in 1996 and 
helped swing the result Mr Yeltsin’s way by backing him in the run-off, 
are mouthing off ever more volubly against the government. Another 
plausible general, Andrei Nikolaev, a former head of Russia’s Border 
Service, has set up his own political party, with a view, some say, to 
becoming president at the next-but-one election in 2004. Other 
less-salubrious (and less-serious) generals, such as Albert Makashov, 
bluntly demand the rule of an “iron fist”. Lowlier ex-soldiers, like 
Alexander Barkashov, who says he has 70,000 adherents (but may have only 
12,000), are out-and-out fascists (though they prefer the label 
“national socialist”). The rumbustious meetings they hold across the 
country are getting noticed. Last week Mr Yeltsin warned grimly of a 
rising tide of fascism. 
“Can the crisis end in a coup?” That was the main headline, on July 7th, 
in Nezavisimaya Gazyeta (The Independent), an influential newspaper that 
often echoes the thoughts of Russia’s most prominent oligarch, Boris 
Berezovsky, who controls it. It reported that a putsch, along the lines 
of the one that ousted Mikhail Gorbachev in August 1991, is already 
being prepared by senior members of the security forces. The slookhi—a 
much used Russian word meaning rumours—are flying. It would certainly be 
unwise to assume, as many specialists on Russia have, that Russian 
soldiers are unkeen to get involved in politics. Many usually sober 
commentators in Moscow now argue that a change of regime, not just of 
government, is in the offing. People at the extremes of 
politics—Communists on the left, nationalists on the right—are starting 
to smell blood. 

Workers revolt 

Strikes in key sectors may spread. Cargo on the Trans-Siberian railway 
is again being blocked. Coal miners in several areas have downed tools. 
Workers in oil-and gasfields are threatening to follow suit. Many 
teachers have stopped teaching. Defence workers in the far east, unpaid 
for a whole year, have given up. Are the army and police certain to obey 
the civilian powers, if it means physically repressing, perhaps even 
shooting such strikers? It is unlikely. 
Russia has, of course, lived through a series of wrenching crises since 
the Soviet Union collapsed at the end of 1991. But in the ensuing 
action-packed six years, there were a number of steadying factors. For 
the first 18 months or so, Boris Yeltsin was buoyed by the popular hope 
that a prosperous new order would soon arise. Even his ruthless 
destruction in October 1993 of a reform-wary parliament that was still 
largely a Soviet creation seemed—in many Russian eyes—justified by the 
creation of a new constitutional order that was ratified by popular 
vote. The trauma of economic disruption, the destruction of savings by 
inflation, the erosion of the cradle-to-grave welfare net (skimpy as 
much of it always was), the insiderish unfairness of much of the 
privatisation of the state, all seemed (admittedly to a steadily 
dwindling constituency) worth the pain—so long as the final result was 
going to be prosperity. 
Another stabiliser was Viktor Chernomyrdin, prime minister for five 
years until his sacking in March. By avoiding most of the hardest 
choices and making compromises where he could, he helped keep the 
Communist-nationalist block in the Duma at bay. Anyone, including these 
“reds and browns”, could buy into the “party of power” if he wanted a 
bit of clout or business. Most important, the oligarchs also had an 
interest in keeping things quiet: hence their bankrolling of Mr 
Yeltsin’s re-election, with their media put at his (and usually the 
government’s) disposal. The Duma huffed and puffed but, softened by 
bribes and threats, it invariably stepped back from confrontation. 
Regional governors, who make up the upper house of parliament and have 
been gaining power and economic independence, also generally co-operated 
with the Kremlin. 

Chaos looms? 

Such calming factors may, however, be fading. Mr Chernomyrdin is gone, 
victim of the cabinet reshuffle that brought Mr Kiriyenko to power. 
There is a growing sense that Mr Yeltsin is a spent force. The 
oligarchs’ support for him is more conditional, short-term and 
ambiguous. They are looking to a successor—and are divided over who that 
might be. In any case, the Yeltsin entourage is sending out ominously 
distinct signals that its man may, after all, run again—despite the 
constitution, which sets two four-year terms as the limit, and contrary 
to the president’s own recent denials that he might stay on. His aides 
say, twistily, that Mr Yeltsin’s first term does not count because it 
started under a Soviet (and therefore now invalid) constitution. 
Whether he runs or not, Mr Yeltsin is yesterday’s man. To be sure, 
during the current crisis he has backed Mr Kiriyenko solidly. His 
courage, canniness and occasional bursts of energy are still felt. But 
most of the time his mental powers are as weak as his physical ones. He 
probably still, from time to time, goes on binges. He is a sick man with 
erratic judgment. Even if he occasionally overrides the Duma with 
sensible decrees, he rarely puts his reputation on the line to force 
reforms through or lobbies the country or parliament assiduously enough 
to sell a policy that is unpopular. Although president, he does not 
As for the regional governors, they too have changed. Rather than 
co-operate with the big man at “the centre”, as Moscow is known, many of 
them prefer to go their own ways, keeping tax revenues for themselves, 
dealing with companies, even countries, off their own bats, generally 
edging away from Kremlin control (sometimes, but by no means always, to 
the benefit of their people). Local voters have kicked out quite a few 
pro-Yeltsin governors. If a new order arose, democratic or not, the 
regional bosses would be likely to play their own part in shaping it. 

What now? 

The coming days will be critical to Mr Kiriyenko’s—and democratic 
Russia’s—survival. Not only does he depend on the IMF (and its chief 
paymaster, the United States) and countries such as Germany (which was 
owed some $30.5 billion of the $72.2 billion of outstanding loans at the 
end of last year). He also depends on the Duma to let him pass the bulk 
of the tax-and-reform package on or before parliament’s final session on 
July 15th and 16th. The Duma never likes the IMF’s suggestions. This 
time it might decide, after all, to face Mr Yeltsin and his government 
down, arguing that the pain of cuts would outweigh the immediate relief 
(in paid arrears, among other things) that a currency stabilisation 
might bring. In reality, the Duma’s obstruction would be motivated 
largely by the gleeful prospect of disorder. 
Then what? As economic chaos took hold, the Duma could—either on its own 
initiative or Mr Yeltsin’s—hold a confidence vote in the Kiriyenko 
government. If it gets the thumbs down, the Duma might well be dissolved 
pending new elections. The opposition, which has shied away from such a 
prospect, might this time feel the moment is ripe for a contest. Or Mr 
Yeltsin could appoint a new government—more to the liking of reds and 
browns. Either way, the new regime would surely be more hostile to 
reform than the current one. Tricky as it is to impeach a president, the 
two houses might at last have a go at sinking him. 
There are still more-drastic possibilities. The chaos of the currency 
collapse could pave the way for some kind of creeping coup, 
constitutional or otherwise. Mr Yeltsin (if he were still there) or a 
successor might, along with a new Duma, be forced to hand extraordinary 
powers to some would-be saviour—Mr Lebed, perhaps. It would not be hard 
to imagine such a figure closing down democracy in the interests of 
order and anti-corruption. The army might be called in to help run the 
show. Whether a Latin American-style strongman would point the economy 
the right way is doubtful. From his new power base in Krasnoyarsk, where 
he recently became governor, Mr Lebed last week noisily rejected 
Moscow’s demands for economic co-operation. 
Even if an economic collapse is staved off and Mr Yeltsin hangs on for 
another two years, the prospects for his succession look bleak. Assuming 
the constitutional court (and his own bodily constitution) lets him run 
again, he will surely lose. To whom? Not, probably, to his two scariest 
rivals. Despite the Duma election victory which Vladimir Zhirinovsky 
chalked up (with 23% of the votes for the half of the Duma filled by 
party list) in 1993, his openly neo-fascist lot have peaked. Likewise, 
Gennady Zyuganov, the Communist leader, looks fated to lead the pack 
with the rock-solid constituency that should gain him one-fifth of votes 
in the first round of a presidential race—but still looks very likely to 
lose to virtually anyone in a run-off. 
The most hopeful candidate would be Boris Nemtsov, still only 38, the 
government reformer most likely to impress voters (though his appeal has 
diminished with power). If Mr Yeltsin and enough of the oligarchs put 
their weight behind him, he would have a chance—but only a very slender 
one—of winning. Quite simply, most Russians are hostile to reform as 
they have known it. 
The front-runners at present, then, are Mr Lebed and Yuri Luzhkov, the 
mayor of Moscow, who is one of Russia’s most brazen crony-capitalists. 
It would be wrong to stick the label “fascist” on either man. Mr Lebed’s 
ideology is resolutely vague. Both would be nationalistic (Mr Luzhkov, 
in particular, promising to make trouble for Ukraine, among other 
places). Neither is likely to be a social or economic liberal, though Mr 
Lebed’s views on economics swing around and Mr Luzhkov is, above all, a 
wheeler-dealer. Neither would care much for the finer points of 
It has become something of a commonplace to say that Russia will never 
go back to what it was—to orthodox Soviet-style communism. True 
enough—though the chances of a Communist president would be hugely 
enhanced if the party changed its name (as its cousins in Central Europe 
have done), disavowed much of its history, embraced a bit of 
free-marketry, and had the nous to put a youthful person like Poland’s 
president, Alexander Kwasniewski, at its head. Fortunately for Russia’s 
reformers, they have no such nous. 
Far more likely, however, if things continue to go sour, is that Russia 
will swing the other way—not all the way to fascism but towards 
something nearly as bad, a kind of extreme nationalism: intensely 
prickly and pan-Slavic, anti-semitic, hostile to foreigners beyond and 
within its boundaries, eager to re-absorb the Slav heartlands of Ukraine 
and Belarus within the Russian fold, eager to make the Baltic trio of 
countries as weak and jumpy as possible. 
This quasi-fascism would also, in economic terms, be protectionist, 
corporatist and loth to privatise any more of Russia’s ailing industry 
or let people (certainly not foreigners) buy land. It would probably 
come to an arrangement with the mighty oligarchs, but their 
crony-capitalism would be tightly dependent on the whims of the 
political powers that be. The armed forces and the successors to the KGB
would be raised again to a position of special eminence within the 
state. The press and television would be corralled. Russia would become 
an angry place—neither democratic, nor prosperous, nor kind to its 
neighbours. It is a nightmare scenario. 


Los Angeles Times
July 10, 1998 
[for personal use only]
Last Rites for the Last Czar Get Low Priority 
Lavish ceremony was in works for Romanov family's reburial. Many now 
distance themselves from event because of politics. 

MOSCOW--The funeral in St. Petersburg next week for the last czar of 
Russia and his ill-fated loved ones was supposed to be an occasion for 
national repentance and reconciliation. 
     But like so much else in Russia in this confused post-Communist 
era, the best intentions of giving a proper burial--80 years late--to 
Czar Nicholas II, Empress Alexandra, three of their five children and 
four servants have fallen victim to posturing and politics. 
     Instead of the lavish ceremony of atonement for the slain royals 
envisioned by President Boris N. Yeltsin, the funeral is proving a fresh 
source of friction between church and state. 
     "This is a country that prefers to cling to its myths," said Edvard 
S. Radzinsky, a noted historian, playwright and member of the government 
commission charged with proving the authenticity of the Romanovs' 
remains. "People who know nothing of science have the power to reject 
scientific facts. 
     "They simply refuse to accept any proof," Radzinsky said of the 
Russian Orthodox Church hierarchy, which has chosen to keep its distance 
from the rituals. "Instead of being an occasion for uniting Russians, 
this funeral may deepen the divides." 
     Despite DNA tests replicated in three countries identifying the 
jumble of bones found near Yekaterinburg in 1991 as the remains of the 
executed Romanovs, the church claims to harbor doubts about the identity 
of what it refers to as "the Yekaterinburg remains." 
     The decision of the church's Holy Synod earlier this year to 
prohibit clergy above the rank of bishop from taking part in the last 
rites has set off a succession of religious, royal and official 
withdrawals from the event. 
     Yeltsin has decided not to attend the ceremony he personally 
ordered, and his political rivals have followed suit in fear that they 
might alienate the huge constituency of the resurgent church. 
     Russian Orthodoxy has been accorded the virtual status of a state 
religion, and the church wields powerful influence with Russians despite 
its centuries-old support for the country's power structures, including 
the Communist Party throughout its 74-year rule. 
     No church prelate ever dared condemn the brutal executions of the 
Romanovs, who were rousted from their beds in Yekaterinburg in the 
predawn hours of July 17, 1918, and gunned down by a Bolshevik firing 
squad without trial. The corpses were trucked out of the city and dumped 
in a hastily dug pit. 
     The church is said to be reluctant to accept the remains as 
authentic because of its dispute with the Russian Orthodox Church abroad 
over canonization of the last czar. The foreign branch, founded by 
Russians who fled the 1917 Russian Revolution, long ago declared 
Nicholas a holy martyr. For the church here to agree now would expose it 
as a Communist collaborator. To reject sainthood would cement the rift 
with the church abroad. Instead, the church has simply refused to make a 
     First Deputy Prime Minister Boris Y. Nemtsov will be the Kremlin's 
representative at the funeral--a role some say the popular politician 
was brave to accept for all its political pitfalls. Even many prominent 
Romanov descendants have decided against attending in the absence of 
Yeltsin and Russian Orthodox Patriarch Alexi II. 
 As originally conceived by Yeltsin, the funeral was to have been the 
most elaborate state occasion since the czar's 1896 coronation. But the 
protocol setbacks and Russia's perpetual financial crisis forced the 
events to be scaled back. 
    The budget for the event has been capped at $830,000, and the guest 
list has been pared from its earlier thousands to about 400. European 
houses of royalty have mostly emulated Russia's decision to be present 
at an inauspicious level. Britain's royal family will be represented by 
Prince Michael of Kent, a first cousin to Queen Elizabeth II, even 
though the queen's husband, Prince Philip, is a relation of the late 
empress and provided DNA samples to aid in identification. 
     Neither will the White House be sending a top emissary. When asked 
who would represent the United States, White House Press Secretary Mike 
McCurry told reporters to "check with our embassy in Moscow." 


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